How much of your money do our politicians think they are entitled to?
The economist Milton Friedman once said, “I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” As this legislative session reaches a climax in St. Paul, the exact opposite appears to be true of Minnesota’s DFL; they are in favor of raising taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.
According to the Minnesota Department of Revenue, in 2017 – the most recent year for which we have data – the state government collected $23.9 billion in taxes. In real, inflation adjusted terms, this was more tax revenue than in any other year in history except for 2016, when it collected 0.9% more. The story is much the same in per capita terms. In 2017, state tax revenues were $4,295 for each Minnesotan, the third highest amount in history, down 1.7% from the historic high of 2016.
From these near historic highs, revenues are set to rise even further. In February, Minnesota’s government was forecast to take $1 billion more from the state’s taxpayers in the next two years than it needs to cover its projected spending over that same period.
And this rosy picture improved further last week when the Department of Minnesota Management and Budget reported that revenue was $489 million higher in April than had been projected: personal and corporate income tax receipts drove the windfall, with individual income taxes $388 million above forecast and corporate taxes were up $133 million. “We advise against making long-term policy decisions based on one month of receipts,” counseled MMB Commissioner Myron Frans. Sensible, but April is when most income tax payments are made, so this figure is particularly significant. And, for the year, tax receipts are now $573 million higher than anticipated.
But the bizarre reality of Minnesota politics right now is that, while the state government is rolling in your hard-earned money, they want even more.
If Governor Walz gets his way, Minnesotans are looking at $12 billion in new taxes over the next four years. The tax bill includes $4 billion of hikes. There are a further $4 billion in the transportation bill; In 2023, the gas tax is estimated to bring in an extra $1.2 billion, the registration tax an extra $678 million, and the metro area sales tax an extra $591 million. The provider tax will bring in another $2 billion, and paid family leave will require another $2 billion in taxes.
Despite what the politicians say, these taxes will not hit ‘the rich’. Department of Revenue analysis – sneaked out without the usual departmental press release and tax committee hearings – shows that Gov. Walz’ tax hikes would hit Minnesota’s low and middle-income families hardest. Those on the bottom half of the income ladder would see an average tax increase of 9.9 percent. For every $100 they earn, these Minnesotans would pay well over a dollar in extra taxes. For every $100 they earn, the poorest 10 percent of Minnesotans would pay an extra $2.37 in taxes. The upper half of income earners in Minnesota, by contrast, would pay an additional 5.9 percent.
Minnesotans are some of the hardest working citizens in America. In March 2019, our state’s Labor Force Participation Rate of 69.9 percent was the second highest in the country after the District of Columbia. Minnesotans work hard to provide for their families and loved ones. At a time when the state’s politicians have never had it so good in terms of revenue, they should not be eyeing up the hard-earned money of the state’s citizens with a view to getting their hands on another fat slice of it.
John Phelan is an economist at the Center of the American Experiment.